Libertarian billionaire brothers Charles and David Koch were among the first to grasp the political potential of social welfare groups and trade associations — nonprofits that can spend money to influence elections but don’t have to name their donors.

The Kochs and their allies have built up a complex network of such organizations, which spent more than $383 million in the run-up to the 2012 election alone.

Documents released in recent months show the Kochs have added wrinkles to their network that even experts well versed in tax law and campaign finance say they’ve never seen before — wrinkles that could make it harder to discern who controls each nonprofit in the web and how it disperses its money.

A review of 2012 tax returns filed by Koch network groups shows that most have been set up as trusts rather than not-for-profit corporations, an unusual step that reduces their public reporting requirements. But that’s only the beginning. Each nonprofit has in turn created limited liability companies or LLCs, through which money can be funneled. Some also have a separate LLC that has the power to replace the nonprofit’s leader.

It sounds complicated and arcane because it is. Some of the nation’s top nonprofit experts said they could only speculate on the reasons for the network’s increasingly elaborate setup.

“My guess is that we’re looking at various forms of disguise — to disguise control, to disguise the flow of funds from one entity to another,” said Gregory Colvin, a tax lawyer and campaign-finance specialist in San Francisco who reviewed all the documents for ProPublica.

Four other leading nonprofit experts and three conservative operatives with knowledge of the Koch network said the most likely reason that the Kochs and their inner circle are using this arrangement was to exert control over the groups without saying publicly who was in charge. In particular, they said, the Kochs likely wanted to prevent any of the groups that they help fund from going against their wishes — as happened with the Cato Institute, the libertarian think tank the Kochs had long supported before they got into a dispute with its president, Ed Crane.

After a top Cato official ridiculed Charles Koch in a 2010 New Yorker article, the brothers pushed to put allies on the think tank’s board. The following year, they pressed Cato to provide “intellectual ammunition” for their oldest politically active nonprofit, Americans for Prosperity, Cato officials later alleged. The dispute was settled in 2012, with the departure of Crane and the installation of a traditional board. (Cato previously was controlled by four private shareholders, including the Kochs, an unusual setup for a nonprofit.)

Robert Levy, Cato’s board chairman, told ProPublica that while he didn’t disagree with the Kochs’ aims, Cato’s leaders were uncomfortable with serving as advocates for their political agenda.

“The Kochs had their notions about what they wanted to focus on, and those tended to focus on intellectual ammunition for what their political ambitions were,” Levy said in an interview last fall. “We didn’t disagree with that, but we didn’t want to operate at the direction of the Kochs. We’re not involved in electoral politics. We are strictly nonpartisan.”

The Kochs have disputed the allegation that they tried to force Cato to do their political bidding.

In this story, we define the Koch network as including 12 nonprofits active in 2012 — 11 social welfare nonprofits and one trade association. These nonprofits all shared the same attributes: They used LLCs, installed Koch allies at the helm and hired the same set of lawyers. (We did not include think tanks, foundations or other charities, nor the like-minded groups that are funded by the Kochs.)

Officials with Koch Industries and groups in the Koch network did not respond to calls or written questions from ProPublica.

When asked about his involvement with Americans for Prosperity in a rare interview with the Wichita Business Journal last month, Charles Koch downplayed his political activity, saying he and his brother did not have day-to-day involvement with the group.

“Listen, if I could do everything that’s attributed to me, I would be a very busy boy,” he told the Journal.

Here’s what we know so far about how the Koch network uses trusts and LLCs, as well as the advantages they may offer.

Disregarded Entities

As of 2012, all 12 Koch network groups had offshoots known as “disregarded entities” — LLCs that are “owned” by their parent nonprofits and are considered part of them for tax purposes….

Equality Fraternity Reality

Strong children

"It is easier to build strong children than to repair broken ones" —Frederick Douglass

Ignorance and Power

“Ignorance allied with power is the most ferocious enemy justice can have.” -- James Baldwin

Money is power….

"Money is power. In Congress, in state legislatures, in city councils, in the courts, in the political conventions, in the press, in the pulpit, in the circles of the educated and the talented, its influence is growing greater and greater. Excessive wealth in the hands of the few means extreme poverty, ignorance, vice, and wretchedness as the lot of the many.”
— Rutherford B. Hayes, President of the United States 1877-1881

Let the people think….

Let the people think they govern, and they will be governed.”
-- William Penn, Some Fruits of Solitude, 1693

Taxes & budgets

Women's rights

Dehumanization

"The propagandist's purpose is to make one set of people forget that certain other sets of people are human" - Aldous Huxley

Money is power

Money is power. In Congress, in state legislatures, in city councils, in the courts, in the political conventions, in the press, in the pulpit, in the circles of the educated and the talented, its influence is growing greater and greater. Excessive wealth in the hands of the few means extreme poverty, ignorance, vice, and wretchedness as the lot of the many.”
-- Rutherford B. Hayes, President of the United States (1877-1881)

Riots

“Riots are the language of the unheard” -- Martin Luther King, Jr.

Cost of War

Currently nearing $1.6 trillion, for Iraq and Afghanistan alone; watch it grow at Cost of War

The cause of war

"The cause of war is the preparation of war." -- W.E.B. DuBois

Presidential limits

"The president does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation."

--Barack Obama, 2007

Totalitarianism

“To be corrupted by totalitarianism, one does not have to live in a totalitarian country.”

-- George Orwell

Reimagining capitalism

"Politicians argue over big government so they can avoid talking about big capitalism" -- William Greider in The Nation

The problem with democracy

Progressive calendar

Click hereto view calendar of progressive events in and near Chester County.Agenda view (click in upper right of calendar) may be best.

Links to other sites:

Let the people think …

"Let the people think they govern, and they will be governed."
--William Penn, Some Fruits of Solitude, 1693

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On humor

"When oppressed peoples have no other remedy they resort to humor" --E. O. Wilson

Koch Brothers index

For a list of all posts relevant to the Koch Brothers on this site, click here.

Truth and consequences

"If one tells the truth, one is sure, sooner or later, to be found out." -- Oscar Wilde

Power

“Power concedes nothing without a demand. It never did and it never will. Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them, and these will continue till they are resisted with either words or blows, or both. The limits of tyrants are prescribed by the endurance of those whom they oppress.”

-- Frederick Douglass, 1817-95

Schools, parents, democracy

“What the best and wisest parent wants for his child, that must we want for all the children of the community. Anything less is unlovely, and left unchecked, destroys our democracy.” -- John Dewey

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Liberty v. power

“The love of liberty is the love of others; the love of power is the love of ourselves.”
-- William Hazlitt, 1778-1830

On war

"No matter what political reasons are given for war, the underlying reason is always economic." - A. J. P. Taylor

Bill Moyers says

"The opposite of poverty is not wealth; it is justice."

Ain’t they got no shame

In the name of peace
They waged the wars
Ain't they got no shame

-- Nikki Giovanni

Need & Greed

"Earth provides enough to satisfy every man's need but not for every man's greed" -- Gandhi

Normalcy?

"If this is normalcy, I'd hate to see what real trouble is" - the late Daniel Shore on Iraq, Morning Edition, NPR, 3/29/08

Freedom and tyranny

"...So long as the people do not care to exercise their freedom,
those who wish to tyrannize will do so; for tyrants are active and ardent, and will devote themselves in the name of any number of gods, religious and otherwise, to put shackles upon sleeping men." --Voltaire, 1764

Thoughts on War

"Every war, when it comes, or before it comes, is represented not as a war but as an act of self-defense against a homicidal maniac." -- George Orwell

"You may not be interested in war, but war is interested in you." -- Leon Trotsky

Total Cost of War

The cost of the Afghanistan and Iraq wars to Pennsylvanians alone is over $57,000,000,000 and to the entire US is over $1.3 trillion; now wouldn't that be helpful in Harrisburg and DC these days? Track our dollars' alarming and destructive disappearance at CostofWar.com

The American oligarchy

“The American oligarchy spares no pains in promoting the belief that it does not exist, but the success of its disappearing act depends on equally strenuous efforts on the part of an American public anxious to believe in egalitarian fictions and unwilling to see what is hidden in plain sight.” — Michael Lind, To Have and to Have Not